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View Poll Results: Which fits you best? See first post for explanations.
I am a retiree whose WR (% withdrawn) is more or less constant each year, and I spend all of it. 11 7.05%
I am a retiree whose WR (% withdrawn) is more or less constant each year, and I tuck some away outside my portfolio, for future use. 21 13.46%
I am a retiree whose spending is more or less constant each year,and I let my WR vary accordingly. 27 17.31%
I am a retiree who doesn't withdraw about the same amount, or about the same percentage each year. 47 30.13%
I am not a retiree. 20 12.82%
I don't fit into any of these categories. 30 19.23%
Voters: 156. You may not vote on this poll

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Old 01-09-2017, 05:51 PM   #21
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While I understand spending less than you've calculated you're "allowed" to spend, I don't look at that as "tuck some away outside my portfolio, for future use"; it just remains in the portfolio.

For instance, let's say I've run various simulations and found that the upshot is I can spend $X this year. If I spend 90% of $X, that other 10% of X just remains as an asset. To me, it wouldn't really matter what account it was in (except of course it's worth a bit more if it happened to be already through the tax gauntlet), money is money.

If the difference was large (20% or more), I might feel inclined to seek out ways to enjoy the difference between what I'm "allowed" to spend and what it looks like the actual spending might turn out to be. Not to the level of the money "burning a hole in my pocket", as my dad used to say, but if I found something interesting to spend it on, it would be more likely than if I hadn't had an excess.
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Old 01-09-2017, 06:11 PM   #22
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Quote:
Originally Posted by sengsational View Post
While I understand spending less than you've calculated you're "allowed" to spend, I don't look at that as "tuck some away outside my portfolio, for future use"; it just remains in the portfolio.
Same here. And you really better understand if you had a "lucky" year with no irregular expenses, like a new roof or furnace, or car replacement, or some other major expense that you have (hopefully) budgeted for but doesn't come every year. Those expenses are going to come some time, and if you've spent the savings from other years, or allocated it for fun, it's going to blow the budget for that year.
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Great Question
Old 01-09-2017, 06:28 PM   #23
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Great Question

Quote:
Originally Posted by GalaxyBoy View Post
Whenever I see "percent" I always mentally add the words, "of what?"

Are we talking about a WR calculated by using the portfolio value on the day of retirement as the denominator for all subsequent years?, or is it figured by dividing the current year's spending by the portfolio value on some arbitrary date, such as January 1st or the anniversary of FIRE?
I sure don't know how everybody else does it, but my WR is calculated by dividing current year's spending (net of pensions and Social Security) by the portfolio value at 1/1 of each year.
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Poll: Retirees, do you keep your Excess Withdrawal? Or Spend it?
Old 01-09-2017, 06:36 PM   #24
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Poll: Retirees, do you keep your Excess Withdrawal? Or Spend it?

I'm starting my third year of a 72t from my IRA. DH retired last year and has a moderate pension. The combination of the two cover our expenses. We also have 401ks, a cash reserve and small Roth accounts that we don't need to touch right now. Our WR is around 2.5% of our overall portfolio. We are still several years away from SS.
Any excess from my 72t just goes into our cash reserve.
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Old 01-09-2017, 06:43 PM   #25
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I withdraw enough to put me as close to the first Medicare high income step as I feel comfortable with. This gives me a fairly consistent withdrawal each year and the cash goes to the house building fund. The biggest thing to do with WR is that it is well under 3%. This will continue until I reach 70 and take my SS. At that point I will have to stop withdrawals or pay Uncle Sam lots more $$$.
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Poll: Retirees, do you keep your Excess Withdrawal? Or Spend it?
Old 01-09-2017, 07:08 PM   #26
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Poll: Retirees, do you keep your Excess Withdrawal? Or Spend it?

I didn't vote because this is just my second year, but I would most likely vote for "retiree who doesn't withdraw about the same amount, or about the same percentage each year." because I am withdrawing USD to be spent in Canada and the exchange rate is a huge wild card.

As for excess, I have decided to carry over from my grocery/restaurant/living expense category except for the first $1,000 not spent. In other words, last year, in this category, my spending was $1,934 below budget, which means I can carry over $934 to this year. It's like a little game I play with my own money. This will most likely become my pocket money to spend frivolously when I am traveling.


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Old 01-09-2017, 07:12 PM   #27
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I also don't draw a fixed sum or a fixed %, but I do keep track very closely. The first 3 years were under 2%, the next year was 3.5% and the last 3 years have been remarkably similar at 5.4%.
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Old 01-09-2017, 07:22 PM   #28
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"Retirees, do you keep your Excess Withdrawal? Or Spend it?"

First, I would have to define excess. I draw monthly as I need to pay the bills. So, there's really no excess.

I track to see my burn rate, and to be sure that it does not go beyond my target WR. If I spend more than that in the last 12 months, I would convince myself it is all OK because the average over 24 months, 36 months, etc... looks better.

Hey, perhaps I can mimic Shiller PE10 and define my WR10. I would make the period shorter, perhaps WR5, because 10 years is a long time relative to a person's retirement years.
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Old 01-09-2017, 07:36 PM   #29
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I only withdraw if I need more than I get from my SS, pensions and dividends, etc. And I gift to my kids each year too, so that eats up 28K. I've been more generous to my charities lately too, so I keep a certain amount of spare cash and give away the rest.
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Old 01-09-2017, 07:44 PM   #30
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I don't have excess money or spare change.
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Old 01-09-2017, 07:51 PM   #31
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Quote:
Originally Posted by sengsational View Post
While I understand spending less than you've calculated you're "allowed" to spend, I don't look at that as "tuck some away outside my portfolio, for future use"; it just remains in the portfolio.

For instance, let's say I've run various simulations and found that the upshot is I can spend $X this year. If I spend 90% of $X, that other 10% of X just remains as an asset. To me, it wouldn't really matter what account it was in (except of course it's worth a bit more if it happened to be already through the tax gauntlet), money is money.

If the difference was large (20% or more), I might feel inclined to seek out ways to enjoy the difference between what I'm "allowed" to spend and what it looks like the actual spending might turn out to be. Not to the level of the money "burning a hole in my pocket", as my dad used to say, but if I found something interesting to spend it on, it would be more likely than if I hadn't had an excess.
That means you have a variable withdrawal rate, as you are reinvesting unspent funds for the long term. Nothing wrong with that, of course. Some of us choose not to reinvest unspent funds in the long-term investments of a retirement portfolio, so there is a difference.

That is really a third option: keep, spend, or reinvest are the actual choices.

From posts read over the years I get the impression that most retirees posting here have variable % withdrawals, and most of those only take out what they need for the year or month and keep the rest invested in their target AA.
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Old 01-09-2017, 08:02 PM   #32
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Quote:
Originally Posted by GalaxyBoy View Post
Whenever I see "percent" I always mentally add the words, "of what?"

Are we talking about a WR calculated by using the portfolio value on the day of retirement as the denominator for all subsequent years?, or is it figured by dividing the current year's spending by the portfolio value on some arbitrary date, such as January 1st or the anniversary of FIRE?
I think quite a few here compare their withdrawal to something like the Dec 31 value of their portfolio each year. I practice the % of remaining portfolio withdrawal method and I do exactly that - take a fixed percent of the Dec 31 value out otpf the portfolio each Jan.

I don't think that many folks here use the Trinity method of some fixed % of the starting portfolio value adjusting for inflation each year.
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Old 01-09-2017, 08:23 PM   #33
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I withdraw 3.5% of our portfolio each Jan based on the Dec 31 value the prior year.

Our portfolio has grown a lot, but our spending hasn't grown so much. As a consequence our withdrawal after taxes, far exceeds our spending at this point.

I am hoarding unspent funds in short-term investments because I don't want to reinvest them in my portfolio because it is too volatile and I'm not seeking to maximize long term return. Plus, once withdrawn, I consider those funds fair game for splurges and part may be needed to supplement income during some portfolio down years. I'm more interested in making good use of the money in the short term while I am younger and healthy.

I did increase our budget for this year. I also hope to buy a nice new car.

With luck, the problem will only get worse (knock on wood) as I do plan at some point to increase our withdrawal rate as we age. We better get to work figuring how to spend it better! Loudly knocking on wood!!
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Old 01-09-2017, 08:29 PM   #34
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I need an option for "I don't know yet !". 2016 was my first full ER year. My budget WR is 3% and I ended up spending that - because I bought an unbudgeted boat with my underspend in medical expenses. Will I do that every year ? I doubt it. My original plan was to spend 1/2 of my underspending and to bank the rest. Maybe that's what I'll do next year. Or maybe not
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Old 01-09-2017, 09:16 PM   #35
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Old habits died hard. At w@rk I managed a cost center - in FIRE I continue to manage costs and not "revenue". As long as our costs are well below my warning lines (e.g. 4% of assets) I'm happy. If they ever approached that, I'd go into cost cutting mode just like in the old days!
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Old 01-09-2017, 09:25 PM   #36
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I pull my base budget out of the portfolio at the beginning of each year. If I want to fund discretionary extras, I pull that as I need to pay off the credit card. If there's any left over at the end of the year, I deduct that from the next year's withdrawal.
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Old 01-09-2017, 10:35 PM   #37
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Right now, with 2 pensions and rental income, DW and I have taken distributions or Roth conversions up to the 15% threshold. That amount is less than 1.5% of portfolio, $100,000<spending<$150,000 and a while before SS.

Still trying to figure out the optimal strategy.
Pensions and rental income here too that cover expenses. Some part time work took me over the 15% tax threshold so no ROTH conversions and I just reinvest dividends
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Old 01-09-2017, 11:20 PM   #38
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I have monthly and quarterly dividends from my mutual fuds coming in to cover my expenses. I build in a surplus or cushion into my budget to allow for unforeseen expenses. Anything left over gets reinvested. Any cap gain distributions also gets reinvested.


In 2015, my built-in surplus was nearly totally eaten up by the deductible and copays and other OOP expenses stemming from my 12-day hospital stay. In 2016, my unexpected medical expenses were much, much lower, so I had more of my built-in surplus reinvested. My SWR went back under 2% in 2016.


I don't use my surplus as a license to spend; very rarely have I gone on even a mild spending spree on non-essential items. The last time I did that was in 2014 when in the span of 6 months I bought some new clothes, bought a new (refurbished) PC for my LF, and went on a relatively cheap vacation trip with her for 2 weeks. My SWR in 2014 was still below 2%.
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Old 01-10-2017, 04:43 AM   #39
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Our spending is fairly constant. Some things go down and others go up depending on the year and other events. Some years there's a new car, other years a new roof but it unconsciously stays within a few $K each year.

Essentially our lifestyle dictates our WR but it is always a percent or two below our calculated SWR.

We start the year with our after tax dividends being WR'd to our checking and then backfill through the rest of the year as needed.
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Old 01-10-2017, 05:57 AM   #40
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Our objective is to make our nest egg last "forever" so the concept of withdrawal rates isn't really applicable. We monitor a number of metrics, of which income from investments, expenses, cash flow and net worth are the most important.

Our spending has fluctuated quite a lot - holidays and home repairs etc are not constant. Income from investments has been rising (if unevenly). Cashflow has been slightly negative due to the principal component on our home mortgage but will become strongly positive when the last payment is made in 4.5 years time. Net worth has grown at faster than the rate of inflation since I retired. DW has gone back to work full time which is unnecessary from a financial perspective but it's what she wanted to do.
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